Advice From An Expert On How To Help Your Teens & Tweens Make Smart Money Moves

“While America’s kids and teens are interested in personal finance education, they’re not getting all the support they need — whether from the educational system or at home from their families,” says Seitz. “Only 23 states currently require a course in personal finance for graduation. And while many parents are open to discussing money with their children, they may lack the confidence in navigating these conversations and finding ways to teach personal finance.”

Seitz encourages parents to discuss money with their children. “Involving your kids in family financial discussions will help them learn the skills they'll need to manage their own budgets in the future,” Seitz tells LittleThings. “The focus doesn’t need to be on the amount of financial resources available, but on how money is used as a resource. It’s important for teens to know the personal finance basics so they can be prepared for financial independence in the future. That includes topics like planning and budgeting, smart spending, saving, investing, and even credit.”

These conversations can start at a young age, according to Seitz. “Money lessons can be sparked by simple everyday moments — are we buying this or that? And why? Sharing your rationale about money choices is the best way to make sure your kids will carefully evaluate their financial decisions, too. Get in the habit of explaining things out loud. You can even involve them in some money decisions of their own.”

She says gamifying financial literacy is a great way to get your kids interested in learning about money. Parents can leverage technology and use apps, or even use board games. “Old-fashioned money games, like Payday, The Game of Life and even Monopoly, and dozens of newer board games all teach important money concepts,” says Seitz. “You can institute a friendly competition between siblings or set a personal best saving goal — with incremental rewards for balances reached. Another way to put money practice in use is to give kids a budget — hypothetical or real — to grocery shop, plan a special outing or even help plan for a big event in the future.”

Kids as young as preschoolers can begin earning an allowance with age-appropriate chores, Seitz says. “A general rule-of-thumb is paying $1 per week for each year of age. Older children often have more expenses and also more opportunities for independence. How much money ordinarily changes hands between you and your child in a typical month? Add it up and categorize it. If it’s a reasonable amount that fits with your budget, think about turning this amount over to your kids in allowance so they can learn to budget.

"The important learning step is to put your kids in charge of managing this money. They’ll need to make it last and ensure they’re covering all their expenses. Help them understand that it’s not all for immediate spending. If you want them to be responsible for smaller unexpected expenses that could come up or larger purchases down the road, you can encourage them to set money aside for saving over time. A lesson for all ages? Making sure they understand that when the money is gone, it’s gone!”

Credit cards bring unique challenges. “When it comes to a credit card, the decision is very individual — even for teens in the same family,” Seitz says. “Giving your teen a credit card is an opportunity to build credit, with all the real-world implications that come along with that credit score. As they build credit in a healthy and positive way, it will have far-reaching impacts, from how much interest they’ll pay on a car loan someday to whether (or not) they’re approved for a home lease or mortgage. It’s their introduction to borrowing while avoiding debt, and the accompanying interest that can carry. Parents can help ensure that they are paying the bill on time and only spending what they have, to start them off with great financial habits.”

Seitz adds, “It doesn't matter whether kids or teens have $5, $50 or $500. When a child receives money, they ultimately have two choices of what to do with it. They could spend it now. Or not. Instead, they could save or invest it, to spend in the future. Often, kids default to immediate gratification. We can’t blame them — they’re still developing the ability to think about the future.

"As parents, we can help them delay that impulse and think longer term about money. Especially for younger children, one way to help them is to think about the trade-offs of saving vs. spending. If a child really wants to buy something but doesn't have enough money, help them set it aside over time. For example, if a new game they want is $60 and they earn $15 per week, talk about all the ways they can budget their money. They could save it all for the game in four weeks. They could spend $5 a week and save $10 a week for the game in six weeks."

Seitz shares how parents teach kids by age group:

“Starting in preschool, kids can learn the basics of money — like what money is used for, how we earn it, and how much things cost. Explain that money isn’t unlimited, so there should always be a plan for how it will be used. Talk through any money choices they might understand, such as how you’re choosing the best price at the grocery store or saving up for a fun treat instead of something else.”

“In elementary school, start setting savings goals and encourage kids to work toward a special purchase. This helps them get into a routine of putting money aside for something they want or need. And it teaches so much more than just achieving a goal — which is a great accomplishment, too. They’ll also learn how to value their money and decide if the item is worth it. As they get older, they’ll understand opportunity cost and, very importantly, delayed gratification — because sometimes you have to wait for the things you want to buy.”

“By middle school, budgeting is an essential financial skill, along with becoming a smart consumer. As teens get older they begin thinking more about their future, and they’re likely managing more spending and savings. They may be making money at a part-time or after-school job, too.

"During high school, they begin thinking more about their life after graduation. That’s where more real-world topics, like borrowing and banking, come to life. They’re making decisions about college and careers — and preparing for financial independence. The teenage years are an ideal time to get a head start on growing wealth. Here’s an example I use a lot: If a teen earning $300 per month at a part-time job invests $150 per month with an 8% annual return starting when they are 16 years old, they can watch it grow to $1 million by the time they are 65 years old."

Ultimately, Seitz says, “Learning by doing is one of the primary ways to build a healthy financial foundation and raise financially smart kids.”